Key pillars of customer loyalty

Tjen’s Word (July 8, 2013)

Key pillars of customer loyalty

 

Introduction

 

I have recently been working on a web site with a theme on beauty culture. One of the key business success factors that I need to plan for carefully is the recruitment and retention of customers.

 

According to experience, recruitment of customers could be done effectively with intensive sales and marketing effort and the per customer direct acquisition cost could be calculated relatively easily; whereas retention is more complex as both art and science and its cost impact is unlikely to be arrived at.  However, since customer loyalty was proven by numerous researches to increase profitability of an enterprise, it’s important that it plans carefully for its customer retention.

 

 

Overview of key pillars of customer retention

 

Generally speaking, there are several key pillars to successful customer retention.

 

However, each corporation/brand has its own unique circumstances making one or more of the pillars more important than others. 

 

The following table shows these key pillars

 

Cumulative customer purchases/service experience	Customer loyalty Pillars
Before any purchases/service encounter	Corporate/Brand image
After initial purchase/service encounters	Perceived value
As purchases/service experience  cumulates	Switching costs
	Customer loyalty
	Relationship Length

 

I have chosen to present the key pillars in accordance to the customers’ cumulative purchase/service experience because this categorization makes sense to most of the managers. 

 

I have chosen also to elaborate on the first three of the pillars (with examples in cosmetic industry) as they are more pre-determinant to the short and medium term customer loyalty.

 

 

Examples of successful applications

 

During early service encounters when corporate image is most influential on the customer choice

 

When a customer has least experience with a corporate/brand, he/she would most likely refer to the words of mouth/testimonials as a validation of the corporate/brand image.

 

A customer will likely listen to the words of mouth/testimonials from those he/she trusts in order to make the first buying decision on a product/service.

 

For successful brands in Asia like SKII, it recruits numerous celebrities to use their products and to give testimonials.

 

After some purchases/service encounters, perceived value plays a large part in customer retention.

 

As a customer cumulates purchase/service encounters with a corporate/brand, the corporation/brand needs to add value such as creation of delight experience from time to time.

 

Another successful brand Shiseido invites its customers to register as members who will subsequently receive invitations to attend free service sessions.

 

The perceived values of these offers are high because Shiseido always selects experienced make-up artists for their customers during these free sessions.  Besides, the make-up artists always serve the customers happily and heartily even if the customers do not buy any products at the end of these sessions.

 

As purchases/service encounters cumulate, switching costs become high and customers can be even motivated to purchase more

 

Complete line of standard packaged skin care products always include various container sizes which last from 3 to 12 months.  Suppose it’s the first time that a customer purchases a complete line of standard packaged skin care products from a single brand, he/she will never be able to finish all the products at the same time. 

 

At certain point in time when a single skin care product is all consumed, it’s likely that the customer will replenish it with the same brand in order to avoid purchasing entire skin care product line, due to high switching cost to replace the existing with a new complete line.

 

More to share about customer loyalty next time…